Social Venture Investment Bank


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Social Venture Investment Bank

  1. 1. Open Infrastructure Model To Support Early Stage Social Ventures<br />Social Venture Investment Bank<br />
  2. 2. Objectives<br />Provide vision and model for a social venture investment bank to support early stage social ventures<br />Incorporate current context<br />Open infrastructures<br />Information technology landscape<br />Introduce notion of ecosystems and describe how ecosystems can form the basis for understanding the investment landscape<br />Provide suggestions on how to rollout the model<br />Advance specific proposal for consideration for funding<br />
  3. 3. Vision<br />Openness: utilize open models whenever possible<br />Collaborative: develop collaborative models whenever possible<br />Focus on ‘emerging’ spaces; I will focus on spaces that are evolving around open architectures<br />
  4. 4. Function, Context and Timing<br />Infrastructure and Investment Banking<br />
  5. 5. What is an investment bank?<br />Add value in the capital allocation process<br />Develop industry segments by judiciously deploying capital in a risk adjusted way<br />Provide intermediary services between capital providers and those that require capital<br />brokerage<br />Provide advisory services<br />
  6. 6. Investment Banks: some history<br />JP Morgan: financed the railroads based on a vision for an integrated Railroad Structure<br />Goldman Sachs: pioneered IPO market<br />Barclay’s: involved in precious metals trading in the 1600’s<br />Drexel Burnham: pioneered high yield debt market<br />Investment Banks satisfied a particular need for capital by creating innovative financial structures<br />
  7. 7. Why Does The Investment Banking Model Work?<br />Market Intelligence!<br />Traditional investment banks have very strong research processes and therefore understand the industry context better than most of the companies in the space.<br />Market Intelligence is based on a top-down view of the space <br />
  8. 8. Why Does The Investment Banking Model Work?<br />Industry Relationships!<br />Traditional investment banks invest a lot of time and energy as a part of their research process to get to know the companies in a particular industry segment<br />There is no shortcut to relationship development...<br />
  9. 9. Developing Infrastructure in the SV Space: function and context<br />What is the function of SV finance infrastructure? To support the evolution and development of the SV space.<br />Therefore: IF we have an evolved SV space, we need many things that would parallel the traditional SV space:<br />Research<br />Brokerage<br />M&A<br />Advisory<br />However, We DO NOT have an evolved SV Space<br />
  10. 10. What is the single biggest reason that we don’t have an evolved SV landscape?<br />We do not have a sufficient infrastructure to support new entrants into the space! <br />No seed funding for pre-proof of concept social ventures<br />No support infrastructure for pre-proof of concept social ventures<br />Developing Infrastructure in the SV Space: the current problem<br />Creating infrastructure to support new entrants into the space should be the single biggest priority from an SV infrastructure standpoint<br />
  11. 11. Why is there a lack of infrastructure to support early stage social ventures?<br />Projects are high risk and, in many cases, do not carry sufficiently visible financial return (in contrast to traditional early stage markets)<br />
  12. 12. The Solution...Mitigate Risk!<br />This can be accomplished by:<br />Developing information and increasing understanding of space<br />Developing relationships to drive transactions; acquisitions, partnerships etc.<br />Driving collaboration between projects and funding the collaboratively (see Ecosystem Pooled Fund)<br />Driving collaboration amongst SV ecosystem to share risk on deals, better enhance due diligence methods etc.<br />One Final Thought...<br />
  13. 13. The Creation of Primary Markets Infrastructure<br />Should Precede the Creation of Secondary Markets Infrastructure<br />
  14. 14. Project Mapping and Relationship Development<br />Developing Early Stage Ecosystems<br />
  15. 15. What is an ecosystem?<br />A natural set of relationships between a group of projects that makes it possible that they collaborate!<br />Share common goals: ‘Solve climate change problem!’<br />Are a part of a value chain: supplier manufacturer, distributor<br />Share common team members<br />Share common customers or markets<br />Etc<br />Manufacturer <br />Supplier<br />Distributor<br />
  16. 16. Why Ecosystems? The Evolution in the Communications Infrastructure<br />Internet connectivity penetration rates are increasing<br />Bandwith limitations are being reduced<br />The cost of communication is dropping (thank you Skype!)<br />Interoperability protocols, applications etc. are evolving<br />Social networking platforms (Facebook...) are changing the culture of communication <br />Processing power is being pushed to the edge of the network (Smartphones etc.)<br />The real time infrastructure is evolving (Twitter)<br />
  17. 17. Why Ecosystems? Changing Patterns of Interaction<br />Information flows freely across organizational boundaries<br />Geographic constraints are less meaningful<br />Structural limitations on information management don’t constrain participation (thousands of people can work on projects!)<br />Meetings can be run virtually<br />Projects can be managed asynchronously<br />Projects can be scaled to involve many people with minimal incremental cost <br />Your communications infrastructure can be scaled to include many people with minimal incremental cost<br />Real Time Connectivity Across Boundaries Makes a Systems View Natural<br />
  18. 18. Sectors/Verticals/Ecosystems...<br />All of the above are ‘ecosystems’. Open ecosystems are a new phenomenon<br />
  19. 19. The TimingIs Right for A Systems Approach To Understanding the Investment Landscape<br />
  20. 20. A Specific Example<br />The Open Manufacturing Ecosystem<br />
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  24. 24. Developing an Ecosystem InvolvesBoth Developing Information on the Projects in the Ecosystem and Making it Visible to all Stakeholders in the Ecosystem, for example...<br />
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  28. 28. From Visibility Into the Ecosystem, opportunities will emerge<br />
  29. 29. Rollout Strategy: the phases<br />
  30. 30. Potential Business Models<br />Support Associated Fund: management fees<br />Align with Funders (Buy side): provide deal flow and to manage investments in the ecosystem<br />Sell Side Funding Mandates<br />
  31. 31. Project Proposal<br />
  32. 32. Develop Single Ecosystem: any ecosystem of your choice<br />Objectives<br />Develop Ecosystem Map<br />Develop Ecosystem Information Model<br />Identify collaborative funding candidates (see Ecosystem Pooled Fund)<br />Identify individual funding candidates<br />Identify ecosystem partner from within ecosystem<br />Draft ecosystem Summary Report<br />Timeline: 6 months<br />Budget: $25,000 <br />Build foundation to prove model in one ecosystem<br />